Published 12:31 pm, Tuesday, September 1, 2015

Connecticut Comptroller Kevin Lembo said Tuesday that the recent stock market plunge could trigger more buying.

Connecticut Comptroller Kevin Lembo said Tuesday that the recent stock market plunge could trigger more buying.

Photo: Jin Lee / Bloomberg

Comptroller confirms small $800K surplus in current state budget

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Comptroller Kevin Lembo on Tuesday confirmed that the first year of the state’s $40.3-billion biennial budget has a slim projected surplus of $800,000. Lembo agreed with last month’s report from Benjamin Barnes, secretary of the Office of Policy and Management that there is potential for major revenue shortfalls.

“The revenue accruals for Fiscal Year 2015 were not as strong as expected, and there is concern that this trend could continue into Fiscal Year 2016,” Lembo wrote in a letter to Gov. Dannel P. Malloy. “There are also numerous revenue policy changes in Fiscal Year 2016, including an estimated $13.6 million in new revenue from the roll-out of Keno gaming, which will be carefully monitored in the coming months. Undoubtedly, revenues will be adjusted in future months as trends become better defined.”

Lembo said that a plan in the budget to force state agencies to save $200.6 million could be tough to complete.

“The current volatility in financial markets has also complicated the budget outlook for Fiscal Year 2016,” Lembo said, affirming last month’s surplus estimate from the governor’s budget office . “Over the past several years, the state has experienced significant fluctuations in capital gains related receipts.” He warned that the state will not realize the kind of capital-gains revenue experienced in 2012, when investors cashed-in at a 15-percent tax rate that was replaced by a 23.8-percent rate on Jan. 1, 2013. In 2014, the state experienced a sharp drop in capital-gains revenue.

He warned that withholding portions of the state income tax, which represent more than 60 percent of total income-tax receipts, have failed to come back from pre-recession levels and 3.5 percent below the state’s last economic recovery period of 20 years ago.

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Lembo said the recent volatility on Wall Street makes it harder to predict how it might affect the state budget, but lower market levels historically results in higher trade volume.